It wouldn’t be hard to integrate Celestica’s systems with public exchanges, says Colnett, but she has little interest in doing so because their capabilities duplicate what she has built in-house. Besides, owning the infrastructure through which Celestica communicates with its partners gives her company a competitive edge. Colnett doesn’t attribute specific financial results to Celestica’s private ex-change participation, but she does think it helps the bottom line. "Because supply chain [management] is such a critical part of what we do," she says, "there’s a major expectation that we are leaders in using e-business tools to do that."

Chris Whitmore, an analyst with Deutsche Banc Alex.Brown in San Fran-cisco, thinks private exchanges are attractive because they’re efficient. "When there’s direct communication between suppliers and customers, information flows more naturally," he says. Public exchanges can add a needless middleman.

However, Colnett isn’t ruling out using a public exchange in the future. "If we felt there was a design tool that was better available through an exchange and our customer agreed, absolutely we would invest in an exchange," Colnett says. Meanwhile, she has outsourced some of Celestica’s online trade. Celestica implements Ariba’s auctioning software when the company needs to buy commodity parts such as memory capacitors. Last fall, Celestica became an investor in PartMiner, a public exchange specializing in electronics components procurement. Celestica uses PartMiner to dispose of surplus parts and made the investment to influence the services it provides. Colnett decided auctioning capability isn’t strategic, so she doesn’t need to maintain it in-house.

Ready to Go Public?

Public exchanges haven’t become a primary procurement venue because they’re not as reliable as contracts with preferred suppliers, says Whitmore. However, HP’s Billington believes there’s untapped value in public exchange auctions. He says using those hubs can change how companies manage supplies by helping buyers account for the risk of surplus and shortage.

Billington imagines public exchanges that let buyers and suppliers trade not physical goods but positions on future supplies, such as safety stock?inventory kept on hand in case supplies run short. "You don’t use safety stock all the time, but you pay for it all the time," says Billington. Buyers could use exchanges to build portfolios of options on supplies or even time on manufacturing equipment, then take delivery or trade as their needs dictate. A similar concept is already in play on exchanges that trade bandwidth, Billington says. Telecommunications companies such as Arbinet use exchanges to sell minutes of capacity. "Once we get the right unit we transact in, that we can hedge in. We’re creating markets that are transparent or nearly transparent," he says. "The efficiency gains are huge."